Agricultural Risk

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AGRICULTURAL RISK
Agricultural risk are element or factor that constraint agricultural production and expose them to danger or loss.
Agricultural risks can range from independent (for example, localized hail losses or an individual farmer’s illness) to highly correlated (for example, market price risk or widespread drought). Managing risks in agriculture is particularly challenging, as many risks are highly correlated, resulting in whole communities being affected at the same time. Clearly, given the widespread nature of resultant loss, financial recovery is particularly difficult and challenging. For governments, the fiscal implications of social safety net payments or the rebuilding of damaged infrastructure can be serious. For insurers, sudden losses suffered by a large number of policyholders places a strain on their reserves and financial stability. For farming communities, there is often no other option than to sell assets, normally at distressed prices. MAJOR RISKS IN AGRICULTURAL TYPE OF RISK | EXAMPLES | Weather | Periodic deficit or excess rainfall, varying temperatures, hail storms, strong winds | Natural disaster (including extreme weather events) | Major floods, droughts, hurricanes, cyclones, typhoons, earthquakes, volcanic activity | Biology and environment | Crop/livestock pests and diseases; contamination caused by poor sanitation, humans, or illnesses; contamination affecting food safety, natural resources/environment, or production and processing | Market | Changes in supply or demand that impact domestic or international prices of inputs or outputs; changes in demand for quantity or quality attributes, food safety requirements, or timing of product delivery; changes in enterprise or supply chain reputation and dependability | Logistics and infrastructure | Changes in transportation, communication, or energy costs;…...

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